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Political parties in India are governed by The Representation of the People Act, 1951 (RPA). Any association of Indian citizens or body of individual citizens of India calling itself a political party need to make an application to the Election Commission to get itself registered under Section 29A as a political party in order to take part in elections and for other provisions of RPA. RPA also allows political parties to receive voluntary contributions from anyone including corporate companies (but not government companies) and exclude contributions from foreign sources such as from citizens of a foreign country, foreign company, foreign corporation, and foreign trust.
India’s political parties BJP, Congress, AIDMK, AAP etc are all registered with Election Commission under RPA.
Section 13A of the Income Tax Act, 1961 deals with tax provisions relating to political parties. In this article, we have discussed the following topics relating to such provision:
Political party for the purpose of Section 13A means a political party which is registered under Section 29A of the Representation of the People Act, 1951.
Political parties are barred from taking any activity of a commercial nature and thereby earning profits. This does not mean political party does not have any income at all. As already mentioned, political parties are allowed to accept voluntary contributions under RPA. Further, political parties may also be owning immovable properties or deposits which might be earning some income. Political parties may have income from the sale of coupons, membership fee collected, and more.
However, Section 13A has given 100% exemption to political parties on its income from house property, income from other sources, capital gains and voluntary contributions received from any person however, subject to conditions. These have been discussed below.
Political party to enjoy tax exemption provided under Section 13A need to fulfill the following conditions:
While condition of no tax relief for non furnishing of such report is coming out of Section 13A, it may be noted that Section 29C of RPA itself takes away tax relief to political party if it fails to furnish such report.
Yes, though political party has 100% exemption on specified income, it is not given any relief from furnishing return of income. Any political party as per Section 13A is required to furnish return of income under Section 139(4B) if its income exceeds maximum amount not chargeable to tax (limit is computed before taking into consideration Section 13A exemption). Tax slab applicable for political parties is same as the one applicable to normal resident individual.
It is the responsibility of the Chief Executive Officer of the political party to file the return of income and also to sign and verify the same.
Political parties are required to furnish their return of income in ITR 7. ITR contains following major information to be filled by political parties:
Corporate donors are eligible to claim exemption on its donation to political parties under Section 80GGB and any other person (except local authority and every artificial juridical person wholly or partly funded by the Government) can claim exemption under Section 80GGC, unless such contribution is made by way of other than cash.